PMS Review: Sundaram Portfolio Management has an AUM of Rs 947 crore

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Sundaram PMS is managed by Sundaram Asset Management Company (AMC) which also manages the Sundaram mutual fund schemes. PMS or Portfolio Management services are fundamentally different from mutual funds even if they invest in the same underlying assets – equities and debt. We explain this below.

What is a PMS?

For the uninitiated, a PMS manages a portfolio of stocks on your behalf. It is similar to an equity mutual fund but there are key differences. A mutual fund pools money from several investors and issues units in lieu of its assets. These units have a Net Asset Value or NAV which is declared on each business day. A PMS does not pool your money with other people’s and does not issue units.

The stocks in the PMS are held in your own name and your money in the PMS is held separately from that of other investors. Unlike a mutual fund, you can also transfer your existing stocks to a PMS. In other words, you give your existing stock portfolio to the PMS manager to manage.

PMS services have a minimum ticket size of Rs 25 lakh.

Sundaram PMS Strategies

Sundaram currently has a set of nine PMS strategies on offer. In its discretionary PMS (where client consent is not required for transactions), Sundaram managed Rs 947 crore for about 1800 clients at the end of March 2017. A strategy is an independent PMS product just as each mutual fund scheme is independent of others. Sundaram PMS strategies are as listed below:

Name

Theme

India Secular Opportunities (SISOP)

Concentrated set of high conviction stocks

Midcap

Midcap companies

Pace

Companies with good growth prospects

Smallcap

Companies growing at 1.5 times GDP with good return ratios, low leverage and strong management

Healthcare

Healthcare related stocks outperforming CNX 500

India Growth (SIGP)

Capital appreciation by investing in high growth stocks

Auto and Ancillary

Auto and ancillary stocks to outperform CNX 500

Microcap

Microcap companies

Opportunities

Capital growth through financial sector companies

Expenses

The Sundaram document lists the type of expenses charged but not how much will actually be charged, unlike a few other PMS schemes we covered. The expenses listed include Portfolio Management Fees, Communication Charges, Depository/Custodian Fees, Registrar and Transfer Agent Fees, Brokerage and Transaction Costs, Fees for investment in mutual funds (if any), Professional charges like accounting and tax, Security lending and borrowing charges and other ancillary charges.

Performance

The performance of Sundaram PMS schemes has been mixed. Five out of eight Sundaram PMS Schemes have outperformed their Benchmarks in the three financial years ending in 2017.

Strategy

% FY 15-17

Benchmark %

Outperform?

Benchmark

India Secular (SISOP)

18%

15%

Yes

S&P CNX 500

Midcap

22%

26%

No

CNX Midcap

Pace

20%

15%

Yes

S&P CNX 500

Smallcap

32%

15%

Yes

BSE 500

Healthcare

13%

15%

No

S&P CNX 500

India Growth (SIGP)

17%

12%

Yes

BSE 100

Microcap

17%

27%

No

BSE Smallcap

Opportunities

10%

5%

Yes

CNX 500

*Source: Sundaram Asset Management, As per disclosures to SEBI for first half of FY 18, We have omitted schemes whose strategy and/or data is missing from the disclosure. No disclosure on whether returns are gross or net of expenses.

RupeeIQ Take

Sundaram’s performance has been middling. The lack of transparent disclosures on expenses is not investor friendly. That said, the bulk of Sundaram PMS products have delivered returns of over 15% per annum over the past three financial years. You should weigh the pros and cons carefully before investing.